Key Takeaways
- A bank valuation is a formal property assessment conducted by a certified valuer to determine the property's market value for lending purposes.
- A bank valuation gives lenders an objective, conservative estimate, while a market appraisal gives buyers and sellers a wider, possibly more optimistic value.
- The cost of valuing residential property ranges from $300 to $600, while the cost of valuing commercial property ranges from $500 to more than $2,000. A lot of residential lenders absorb this cost.
- A property valuation report has information about the property, any improvements made to it, an analysis of the market, zoning and legal information, a rental assessment, the method and figure used to value the property, and a possible risk rating.
- There are different kinds of property valuation reports, such as a full valuation report, a kerbside valuation, a desktop valuation, an automated valuation model, and a short-form valuation.
- You can usually get a free bank valuation when you apply for a loan or as part of a lender's promotional offer.
- We at Dark Horse Financial offer free bank valuations even if you aren't applying for a loan so that you can make the best choice.
When buying, selling, or refinancing a property, you may have encountered the need for a property valuation. In Australia, bank valuations are a standard part of real estate transactions, whether for residential or commercial properties. What is a bank valuation, why is it needed, and how much does it cost? This guide will help you learn all there is to know about it.
What Is a Bank Valuation?
A bank valuation is a formal evaluation of a property’s market value done by a professional valuer for a bank or other financial institution. This tells you how much the bank thinks the property is worth, which affects how much money they are willing to lend you. When you want to get a loan for a property or refinance, you need a bank valuation.
A bank valuation is usually more conservative, so you might find that the bank valuation is lower than the market appraisal. An appraisal is an optimistic guess that takes into account the highest price a buyer is willing to pay and a seller is willing to accept. On the other hand, bank valuations are stricter and take into account the property’s physical features.
Why Are Bank Valuations Necessary?
To get an accurate and unbiased picture of how much a property is worth, you need to do a valuation. Lenders can reduce risk by using valuations to figure out how much a property is worth, which affects the amount and terms of a loan. Buyers use valuations to find fair prices and get better deals, especially when they are refinancing. Also, valuations are very important for legal reasons, such as settling an estate, getting a divorce, or figuring out tax. Valuations help make real estate deals more open and trustworthy by giving a reliable standard.
How Much Does a Bank Valuation Cost in Australia?
The cost of property valuation varies depending on the type of property, the purpose of the valuation, the location, and other factors. Below is a general breakdown:
- Residential Property Valuation Costs: For residential properties, such as houses or apartments, the house valuation cost typically ranges between $300 and $600.
- Commercial Property Valuation Costs: The commercial property valuation cost is generally higher, ranging from $500 to more than $2000.
Understanding Valuation Reports
A property valuation report gives a thorough evaluation of a property’s worth based on market conditions and the property’s unique features. Below is a list of the main parts that are usually included in a property valuation report.
Property Details
The report begins with a comprehensive description of the property, including:
- Address: Exact location of the property.
- Type of Property: Residential, commercial, industrial, or mixed-use.
- Size: Land size and building size
- Age and Condition: The property’s age and overall condition (e.g., new, well-maintained, or in need of repair).
- Structural Features: Details of the construction materials, roof type, and foundation.
Property Improvements
This section outlines any significant improvements or unique features of the property, such as:
- Renovations or extensions.
- Additions like a pool, garage, or outdoor entertainment areas.
- Energy-efficient upgrades (e.g., solar panels, insulation).
- Interior features like modern kitchens, bathrooms, or high-end fittings.
Market Analysis
This section evaluates the property in the context of the current real estate market:
- Comparable Sales: Recent sales of similar properties in the area are used to benchmark the value.
- Market Trends: Analysis of market conditions, such as rising or falling property values, demand, and supply.
- Location Analysis: The impact of the property’s location, including proximity to schools, transport, shops, and other amenities.
Zoning and Legal Information
This section includes important legal and regulatory details, such as:
- Zoning Classification: Determines what the property can be used for (e.g., residential, commercial, or mixed-use).
- Encumbrances: Details of any easements, covenants, or restrictions affecting the property.
- Planning Regulations: Compliance with local council and planning requirements.
Rental Assessment (if applicable)
For investment properties, the report may include:
- Current Rental Income: If the property is already tenanted.
- Rental Market Analysis: Estimated rental value based on similar properties in the area.
- Vacancy Rates: An indication of how long it might take to find tenants.
Valuation Methodology
The report outlines the approach used to determine the property’s value. Common methodologies include:
- Comparable Sales Method: Compares the property to recently sold, similar properties.
- Income Capitalization Method: Used for investment properties, it evaluates value based on rental income and expected yield.
- Cost Approach: Assesses the cost to rebuild the property from scratch, considering depreciation.
Valuation Figure
The final valuation figure is the most critical part of the report. It includes:
- Market Value: The property’s estimated value if sold under current market conditions.
- Forced Sale Value: A lower estimate reflecting a quick sale scenario (e.g., foreclosure).
- Insurance Value: The replacement cost for rebuilding the property, excluding land value.
Risk Rating
Valuers may include a risk assessment that highlights potential issues affecting the property’s value, such as:
- Market volatility.
- Structural defects.
- Legal disputes or zoning changes.
Types of Property Valuation Reports
These are the common types of property valuation reports:
1. Full Valuation Report
The most comprehensive type of property valuation is a full valuation. It includes a thorough look at the property’s features, condition, and location, as well as a thorough look at the market. Lenders often need this kind of report for legal reasons or for financing.
2. Kerbside Valuation
A kerbside valuation is a less detailed report in which the valuer looks at the property from the street without going inside. It costs less and takes less time, but it only gives a rough idea of how much the property is worth. This is good for preliminary assessments or loans with low risk.
3. Desktop Valuation
People do desktop valuations remotely using information from property records, sales history, and online tools. They are economical and quick, but they aren’t as accurate as a physical inspection. This makes them good for lending situations with low risk or when time is very important.
4. Automated Valuation Model (AVM)
Using data analytics, property information, and recent market trends, an AVM gives an estimated property value. It’s quick, often instant, and economical, but it’s not as accurate as a physical inspection. People often use AVMs to get pre-approvals, screen properties, or do preliminary evaluations before deciding on a formal valuation.
5. Short-Form Valuation
A short-form valuation is a simplified version of a full valuation that gives you the most important information about a property and an estimate of its value. It has a summary of the property’s features, an outside inspection, and recent sales data for similar properties, but it doesn’t go into the detailed analysis that a full valuation does. Lenders usually use this type when they only need an immediate and straightforward valuation for a loan.
Can I Get a Free Bank Valuation?
Yes, some banks and financial institutions offer free valuations as part of their loan services. We at Dark Horse Financial offer a free bank valuation service outside of the loan application process to help you make the most informed decision when it comes to purchasing property or getting the most out of your equity.
When Are Free Bank Valuations Offered?
- As Part of a Loan Application: Many lenders include a free property valuation when you apply for a home loan, investment loan, or refinance. This is a common practice as the valuation helps the bank determine the appropriate loan-to-value ratio (LVR).
- Promotional Offers: Some banks run promotions that include free valuations as an incentive to attract new customers. These offers may be seasonal or tied to specific loan products.
How to Increase Your Chances of Getting a Free Bank Valuation
- Research lenders that advertise free valuations as part of their service. Check the fine print to ensure the offer applies to your specific circumstances.
- If you’re an existing customer with a strong financial relationship with the bank, you may be able to negotiate a free valuation.
- Keep an eye out for limited-time offers where lenders waive valuation fees. These promotions can save you hundreds of dollars.
- Reach out to us to get a free property valuation. We’ll let you know the value of your property for loan, legal, or other purposes.
To Sum it Up
When you buy or refinance a home, you need to know how much the bank thinks it’s worth. It lets everyone know how much a property is worth and how much it should sell for. Bank valuations can range from $300 to more than $2000, depending on the type of property and the lender. But there are some cases when a borrower can get it for free. Some lenders will give you a free valuation when you apply for a loan. Talk to your lender or get help from financial experts like Dark Horse Financial to find out if you can get a free bank appraisal.
Get a Free Bank Valuation Today
Dark Horse Financial offers free property valuation outside the loan application process. Reach out today to get your bank valuation on us.
